Due to its simplicity in establishment and adaptability in management, limited liability companies (LLCs) are a common company structure in Illinois. Many business owners are unsure of their tax responsibilities, though. The answer is yes, LLCs are liable to state taxes in Illinois, although the precise amount of tax due will vary depending on the form of LLC and its income.
The two types of LLCs recognized in Illinois are single-member and multi-member. Multi-member LLCs have more than one owner, whereas single-member LLCs are owned by a single person. Single-member LLCs are regarded as pass-through entities for taxation purposes, which means that the owner’s personal tax return must be used to report the business’s income and costs. The LLC does not have to pay taxes on its own earnings. However, the Illinois Replacement Tax, a 1.5% tax on net income, is applicable to single-member LLCs. The state income tax is in addition to this tax.
The income and costs of multi-member LLCs, on the other hand, are taxed as partnerships and are therefore reported on a partnership tax return (Form IL-1065). Each member of the LLC is responsible for paying taxes on their respective portions of the LLC’s profits; the LLC itself does not pay taxes on its income. Multi-member LLCs are liable to the Illinois Replacement Tax, just like single-member LLCs are.
What are LLC and PLLC?
Licensed professionals including doctors, lawyers, and accountants can form a PLLC, or professional limited liability company, which is a type of LLC. The primary distinction between an LLC and a PLLC is that a PLLC is subject to additional rules and specifications about professional behavior and licensure. However, both LLCs and PLLCs are regarded similarly for tax reasons in Illinois. In Illinois, how can I form a PLLC?
You must first acquire the required professional licenses and fulfill any additional requirements imposed by the body that oversees your profession in order to form a PLLC in Illinois. You can submit Articles of Organization to the Illinois Secretary of State’s office once you have satisfied these conditions. The professional services that will be offered must be specified in the Articles of Organization together with a statement that the LLC is a PLLC. Do I require an Illinois business license?
The type of business you are starting and the location will determine the answer to this query. A state license is necessary for various businesses in Illinois, including daycare centers, beauty parlors, and liquor stores. A regional business license can also be necessary, depending on the municipality. To make sure you are functioning lawfully, it is crucial to investigate the unique laws for your industry and location.
In conclusion, Illinois state taxes are levied against LLCs, although the actual amount is dependent on the type of LLC and its income. Multi-member LLCs are taxed as partnerships, whereas single-member LLCs are subject to the Illinois Replacement Tax. PLLCs are taxed similarly to LLCs for tax reasons but have extra requirements for license and professional behavior. Finally, it’s crucial to understand the particular criteria for your business and area because certain firms in Illinois need a state and/or municipal business license.